Category: Corporate & Sovereign Strategy

Brazil’s BNDES development bank may take a stake in ailing carrier Varig as Latin America’s biggest airline struggles to reorganize its finances under new bankruptcy legislation. BNDES could take a share in Varig to help it renegotiate $3.4 billion in debt, a bank official told a creditors meeting in Rio de Janeiro. The BNDES has agreed to finance sale of Varig’s maintenance and cargo units.

Ecuador has invited banks to bid to manage the sovereign’s first international bond offering since it defaulted on its debt in 1999. An announcement in yesterday’s New York Times asked banks to submit their bids by October 14. It said the offering will not be made in the US but failed to provide more detail. The Latin American issuer defaulted on $6.5 billion of debt in 1999. In 2000 it restructured its debt, issuing 12- and 30-year dollar-denominated paper. Ratings agency S&P yesterday reaffirmed its CCC+ long-term sovereign credit rating for Ecuador and removed it from CreditWatch with negative implications. The action follows the approval of a $400 million loan from the Latin American Reserve Fund (FLAR), which reduces the short-term risk of a shortfall in government financing.

Argentinian electricity distributor Edenor has begun restructuring more than $500 million of its debt and has halted interest payments while it negotiates with creditors. Capital payments were suspended in September 2002 following the country’s economic meltdown. The restructuring announcement follows the signing of a new agreement last week with the government which allows Edenor to raise non-residential tariffs by around 15% from November. These have been frozen since 2002. Control of the company was taken over in June by local group Dolphin, which bought a 65% stake from Electricité de France, EDF.

Mexican satellite company Satelites Mexicanos (Satmex), has won a court order preventing US creditors from seizing its assets as the company reorganizes in Mexico. Satmex filed for bankruptcy protection in Mexico in June and last week asked for protection in New York under Section 304 of the US Bankruptcy Code, which bars creditors and others from interfering while a debtor reorganizes in another country. Satmex has defaulted on more than $520 million in bonds issued in the US.